Money Printing without the Guilt - If only the Fed had listened to me!

A few weeks ago, I wrote in this blog that the Federal Reserve should return to the gold standard at the current market price and from that moment forward maintain the value of the dollar in terms of gold from then on. At the time I wrote that blog entry, gold was trading at about $1850 per ounce.

Now, with recession fears gripping the market, the dollar price of gold has dropped to around $1700 per ounce. And had the Fed followed my advice, they would now be working to bring the price of gold back up to the target price of $1850 per ounce. There are at least two mechanisms for doing this: 1) purchase U.S. Treasuries much like theyn have been doing over the past couple three years; 2) purchase gold on the gold markets. In both cases, the purchaces would be made with dollars printed as it were out of thin air.

What is ironic is that the Fed would dearly love to print more dollars to try and stimulate the economy. But after two rounds of Quantitative Easing and the severe criticism that resulted, the Fed has been reticent to print more dollars. Bernanke has also expressed scepticism if not scorn about returning to the gold standard. Yet, were we on the gold standard, printing money is what they'd doing now, it would be happening automatically to counter-act deflationary pressures as exhibited by the falling dollar price of gold.